The Flood: Our nation's court system at a breaking point with frivolous debt collection lawsuits

[ck4829]

With courts clogged with automated lawsuits from debt collectors, many of which may be for debts the defendants do not owe, the Federal Trade Commission yesterday took steps towards restoring sanity to what it called a "broken" debt collection system.

The FTC issued a report titled "Repairing a Broken System: Protecting Consumers in Debt Collection," the product of more than two years of town-hall-style discussions and evidence collected by the commission's own staff. The report outlines the problems that have mushroomed in America's debt collection system and contains recommendations for changes in state laws aimed at reining in frivolous robo-suits and other abuses by debt repurchasers.

The activities of traditional debt collectors have been governed by Federal and state regulations for some time, but those regulations do not yet fully extend to debt purchasers. As a result, individuals have received harassing phone calls from collectors and been named as defendants in collection suits based on inaccurate information. Some purchasers deflect consumer and legal complaints by sending them to erroneous addresses, such as a public library in Ithaca, N.Y.

As a result, complaints to the FTC about unethical collection practices skyrocketed in 2009, ranking second only to identity theft as the most frequent source of complaints.

http://www.huliq.com/8738/ftc-moves-fix-broken-debt-collection-system

The Federal Trade Commission recommended states change their laws and arbitration rules after an agency report found the system for resolving consumer debt-collection disputes is "broken."

With unemployment high and a big numbers of consumers in distress, collection activity is on the rise. The FTC has said complaints about "third-party and creditor debt collection" were the second-biggest area after identity theft in 2009.

On Monday, the agency urged states to adopt laws that encourage consumers to defend themselves against debt-collection lawsuits, rather than accept default judgments. In addition, it recommended states change laws to prevent the freezing of amounts in a bank account, require collectors to include more information about the alleged debt in their complaints and make it more difficult for collectors to sue on debt on which the statute of limitations has run.

http://online.wsj.com/article/BT-CO-20100712-709636.html

Credit card companies and other creditors are selling small or difficult to collect debts to debt buyers for pennies on the dollar. Those buyers then try to collect as much of the debt as they can, and they are increasingly turning to lawsuits to make that happen, the NYT says. The suits are plagued with the problems you'd expect, the NYT reports. "Most consumers fail to show up in court, and those who do rarely have a lawyer," the paper says. Law firms like Cohen & Slamowitz use automated software to file huge batches of suits quickly, and the process results in crucial errors, including misstatements about how much the debtor actually owes, the NYT says.

http://amlawdaily.typepad.com/amlawdaily/2010/07/julyoverburden.html

Trying to sue a person who doesn't have any money is like suing a person because they're unable to turn water into wine or unable to get blood from stones. It's just not going to happen, because they don't have any money. They don't. And for every person who is in debt because they tried to live like a playboy, there is at least 5 people who are in debt for medical reasons both direct and indirect. The only reason they're in debt is because they refused to "die quickly."

But even this isn't a cause, but rather just a symptom, of our increasingly dangerous and fanatic hyper-capitalist/corporatist state.

[Newest Reality]

1. Like sharks in a feeding frenzy

over a bucket of minnows?

[mike_c]

2. I'm currently having problems with those scumbags....

Three years or so ago I got a letter from some debt collection agency claiming that I owed the Commonwealth of Virginia state income taxes from 1988. The whole bill, taxes and penalties, amounted to a little over $1000, TWENTY YEARS LATER. There was no documentation about the supposed "debt" whatsoever. Just the assertion that I owed the money.

I disputed it, of course. I actually did live in Virgina in 1988, and I did work part time because I was a full time university student from 1987-1995 (but only 1987-89 in VA), but I paid income tax and doubt seriously that I did anything other than file the most EZ form imaginable and paid right out of the tax tables. I certainly can't rule out a mistake now, twenty years later, though. Nothing further happened, at least not via that particular scumbag. But ever since then I've been dealing with one dept repurchaser after another, about one every year or so. None have EVER provided any documentation or substantiation about the debt. Not once. But now the "debt" is increasing more rapidly-- I think it's up to nearly $3000.

[Donnachaidh]

3. bank of america is using robo-calls for collections

I *inherited* a phone number of a family that is obviously having pretty severe financial things going on. So far, I've been able to nicely tell the agents that they haven't had this number for months etc. But this morning I got a robo-call looking for them from B of A, and I tried to hang on to talk to an agent to tell them they had the wrong number, but after ten minutes of waiting, hung up.

When a corporation is using robo-calls to the point that their reps cannot keep up in a timely fashion to ANSWER the calls -- WTF? This nonsense should be banned as well. It's obscene how corporate America continues the SQUEEZE on consumers for every single penny they are owed.

[Statistical]

4. "Trying to sue a person who doesn't have any money"

Judgments are very valuable because state depending they last for a decade.

If you get a judgment you don't just haves access to their current money (which may be nothing) you get access to all future money.
Some people will still be broke in a decade but for many who may be broke because they have no job they will find a job in next 10 years.